This year budget has surprised everyone with its holistic positive approach esteeming all the sectorsconcerned but especially favouring the rural economy and middle class. The budget saw several announcements being made particularly keeping in mind the salaried class and middle class. Let me take you through an in-depth analysis of the announcements.3
Some of the major announcements made this Budget were:
No income tax for income upto Rs 5 lac per annum.
Standard Deduction for the salaried rose to INR 50,000 from INR 40,000.
TDS limit hiked from INR 10,000 to INR 40,000 on post-office savings.
Gratuity limit increased from Rs 10 lakh to Rs 30 lakh
No-tax on notional rent on second self-occupied house.
Benefits under Sec 80(i)BA extended for one more year, for all housing projects approved till end of 2019-2020
Tax Rebate Change and not a tax slab change
The budget has proposed the individual tax rebate limit to extend to Rs 5 lakh, which means you do not need to pay any income tax if you earn up to Rs 5 lakh. So, the taxpayers earning income up to Rs 5 lakh will get full tax rebate under section 87A. What it means is that the taxpayers with a net taxable income of up to Rs 5 lakh do not need to pay any taxes. But, all the others who are earning a net taxable income above Rs 5 lakh will only get the standard deduction benefit and not the benefit of this enhanced rebate. Please note that – the change proposed is a tax rebate and not a tax slab change.
So for example, if you are earning say Rs 9 lakh a year and have invested fully u/s 80C for Rs 1.5 lakh and also have a home loan interest of Rs 2 lakh, then your net taxable income will be Rs 5 lakh after reducing Rs 50,000 towards standard deduction, Rs 1.5 lakh u/s 80C and Rs 2 lakh towards home loan interest u/s 24B, thereby you will be eligible to claim this rebate hence go completely tax free.
Standard Tax Deduction Limit For Salaried Persons Hiked
Last budget has brought back the standard deduction for salaried taxpayers with a limit of Rs 40,000 against the earlier medical bills reimbursement and transport allowance. The said limit is increased by Rs 40,000/- to Rs 50,000/-.
TDS Limit u/s 194A on Interest Is Increased
The tax deducted at source (TDS) on the interest income from your bank deposits or post office savings deposits has been raised to Rs 40,000 form the existing Rs 10,000 and it will be a relief for those taxpayers who have invested in the bank fixed deposits or post office deposit schemes. But please do note that this is not a tax exemption meaning, you still have to pay tax on the entire interest income you earn out of your fixed deposits and post office deposits. This is just a hike in the tax deducted by the banks or post office, which they won’t be deducting up to Rs 40,000 interest income thereby saving you from claiming a refund if your total income is less than basic exemption limit.
Gratuity Limit Increased
The gratuity limit is also increased by Rs 20 lakh from the existing Rs 10 lakh limit.
No Notional Rent on Your Second House
Budget has also announced benefit for those who own multiple houses, now they don’t have to pay any notional tax on their second house meaning, if their second house is not let out, and then unlike till now they are supposed to pay a notional rent which is done away with. As the finance minister mentioned at the start of the Budget, several provisions were included in Budget
2019 – keeping in mind small taxpayers especially the middle class, salary earners and senior citizens. The higher exemption for tax payers will increase the purchasing power of the individuals and the buying power of the growing section also suggests that it will become a driving force within the Indian economy but it is also important to approach them smartly and accordingly make your investments for the next financial year.
Rahul Jain, EVP, Edelweiss Wealth Management